Budget Office: Wage Boost Would Cost Firms $15 Billion

ALAN FRAM | Associated Press

WASHINGTON (AP) – A Senate Democratic bill gradually increasing the federal minimum wage to $10.10 hourly would require private businesses to spend $15 billion more in salaries when it takes full effect in 2017, the Congressional Budget Office estimated Thursday.

The nonpartisan budget office's estimate could be used as ammunition by Republicans, who largely oppose the measure because they say it would drive up business costs.

But it could also be beneficial to Democrats because the private sector spent $5.4 trillion on wages in 2012, according to the most recent data from the federal Bureau of Labor Statistics. That means the increased pay would boost employers' wage costs by just 0.003 percent, or about one-third of a penny for every dollar spent on salaries.

The Senate is expected to begin debating the election-year Democratic measure when lawmakers return from a spring recess in two weeks. Republicans seem likely to muster enough votes to block it, and there is no evidence yet that Democrats are willing to broker a compromise.

The minimum wage is currently $7.25 hourly. The bill by Sen. Tom Harkin, D-Iowa, would increase the minimum in three steps, reaching $10.10 two-and-a-half years after the bill becomes law.

The budget office also estimated that the measure would force state and local governments to pay workers $1 billion more in 2017 than they would otherwise be required. Those governments paid $840 billion in salaries in 2012, according to the Bureau of Labor Statistics.

The federal government would incur just $2 million in added wage costs for the entire decade ending in 2024. That's because it has fewer than 4,000 workers earning less than $10.10 hourly, the budget office said.

The federal government spent $207 billion in wages in 2012, according to the labor statistics bureau.

But the Democratic bill would cost the government $5 billion in lost revenue over the coming decade. In an effort to win votes from moderate Democrats and perhaps Republicans, Harkin's measure would give bigger tax breaks to some smaller businesses that purchase equipment over the next three years.

In February, the budget office estimated that the Democratic bill would mean $31 billion in higher earnings for low-paid workers in 2016.

That figure was higher in part because it included workers not directly covered by the minimum wage law and others earning over $10.10 who analysts believed would get raises as employers adjust their pay scales upward.

The budget office has also estimated that the measure would raise earnings for about 16.5 million workers earning under $10.10, but cost about 500,000 others their jobs as employers adjust to higher costs.

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